Russian 12.5% wheat offered at a discount price as demand falters

Lack of demand and fears over tension mean price differential of Russian and Ukrainian wheat is at narrowest since April 2020

Offers for Russian 12.5% wheat have been heard at the same level as lower quality Ukrainian 11.5% indications as a lack of demand and fears over the unfolding geopolitical situation take their toll on trade activity, trade sources have told Fastmarkets Agricensus Monday.

The lowest offer for Russian 12.5% wheat dropped by $5 per tonne to be heard at $310 per tonne FOB NTT for March loading, trade sources said, with Ukrainian 11.5% offers heard at the same level for FOB Mykolaiv loading.

The Ukrainian port typically handles smaller handysize cargoes, while Ukrainian 12.5% offers were heard at $314-315 per tonne FOB Mykolaiv with bigger panamax volumes heard offered at levels well above the benchmark 12.5% Russian wheat grade.

Other offers for Russian cargoes were also heard at around $320 per tonne FOB NTT for March loading, but amid a lack of demand, there is little appetite for such levels and values are expected to move lower.

While offers do not conclusively prove that value is at parity, Ukrainian 11.5% and 12.5% wheat would normally trade at a slight discount to the bigger volumes of Russian 12.5% wheat export flows – with offer levels normally reflecting that difference.

Demand for wheat out of the Black Sea – and particularly from Russia – has already been weak for a long period, the rise of a political factor has added uncertainty and risk to trade in the Black Sea region amid sharply increased tensions along the border between Russia and Ukraine.

“This is related to the political situation of course, but the nearest demand is also covered,” one trader said.

Buyers, faced with a Russian export tax that is updated weekly, had already been switching to other, cheaper origins, such as Argentina and Australia, but the deployment of large numbers of Russian troops around Ukraine has further raised tensions.

As such, while prices in the global market have been volatile in recent weeks – fueled by the tensions and fears over disruption to logistics and a loss of supply – offer levels for Ukrainian and Russian wheat have been slowly declining.

Currently, physical trade in the region is on pause as market participants continue to follow the political developments amid the possibility of a Russian invasion of Ukraine.

That uncertainty has not been helped by news that shipowners are also starting to add an additional war risk premium for vessels transiting the Black Sea and Azov Sea, key regions for grains exports.

But at the same time, trade sources expect most of the wheat volume sold to Algeria last week to be sourced from the Black Sea, and mostly from Ukraine according to sources.

Keep up to date with the wheat market and trends shaping the agricultural landscape, visit our dedicated wheat market page.

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